Get a handle on four major cost drivers

If you want to cut costs, try this method

The buzz words of outpatient facilities in the 1990s undoubtedly are "cutting costs." These two words could mean the difference between profit and loss for many outpatient facilities that are caught in the reimbursement crunch between managed care and Medicare.

The good news is that this may not be as difficult as you imagine. Outpatient surgery centers could measure and then cut the costs of any procedure by focusing on four cost drivers, says Kathryn Barry, senior director of health policy and reimbursement at United States Surgical Corp. in Norwalk, CT.

"Any health care provider doing ambulatory surgery needs to have a tool or methodology to capture the cost of the procedure because of the proposed reimbursement changes anticipated for ambulatory facilities," Barry says.

United States Surgical Corp. provides consulting services to health care providers, including its Best Practices program for procedural cost analysis. Barry and three other U.S. Surgical Corp. consultants describe the four cost drivers as follows:

• Operating room time.

Excess OR time can raise costs if patients or anesthesiologists are late or if there are delays in surgeons turning over the room for the next procedure, says Randolph Williams, MBA, director of health care strategies for U.S. Surgical in Manassas, VA.

One 10-minute delay could affect all of the other surgeries that day and cost the facility more money, Williams adds.

The solution is to identify what is causing these delays by reviewing surgery data. They might reveal that two surgeons consistently do this procedure on time, while others are consistently late, Williams says.

"All surgeons want more time in the OR, and if they’re delayed by 15 minutes, they may not get in that last case of the day," Williams says.

So, the facility’s managers should share these data with the surgeons. They should show them how much even five minutes of lateness in the OR costs the facility, says Kyle Nelson, MBA, manager of provider services for U.S. Surgical in Norwalk, CT.

• Use of instruments.

Efficient physicians might have a slightly higher instrument cost because they use disposable instruments, Barry says.

But those disposable instruments might be more cost-effective because they save time and perhaps even manpower in the operating room, says Jeff Frum, MBA, health care strategy director for U.S. Surgical in Trabuco Canyon, CA.

"Disposable instruments are a lot more efficient in the OR because there is no assembly or disassembly of parts," Frum says. "There’s a lot of downtime in the OR assembling these instruments or finding back-up replacement parts."

• Ancillary service ordering.

This area includes pharmacy, laboratory tests, radiology, respiratory, cardiology, and other services provided to patients. Ancillary services might experience significant inflation over time because physicians tend to be generous in ordering additional lab tests and other services, Barry says.

"The lesson we’ve learned is if you look at ancillary services, you have a huge opportunity to streamline and reduce costs," Barry adds.

For example, she says, standard preoperative testing once included four or more diagnostic tests, and some physicians still call for that many. But the standards today say physicians need order no diagnostic tests if the patient is healthy and middle-aged.

Anesthesia costs are another example. A surgery center might find that one particular anesthesia agent is more expensive than others, but it saves money because the patient recovers more quickly. Thus, the length of stay is reduced, Nelson says.

• Length of stay.

Look at expanding your selection of procedures, and go after some traditional inpatient procedures, Barry suggests.

You also may reduce the lengths of stay by influencing patients’ expectations up front, Williams says. "So, when you go into the physician office for the first time, you are given this road map of this procedure and what to expect," he says.

For example, the physician or case manager might tell the patient that if all goes well with this surgery and there are no complications, the patient will feel great and will want to go home within two hours after surgery, Frum says. This can have a significant impact on the patient’s recovery time, he adds.

Another cause of delays in length of stay is a surgeon who is lax about discharge procedures. The surgeon might not get around to filing the discharge orders or seeing the patient as soon as possible, Frum says.

All of these cost drivers have become extremely important in today’s health care environment, Williams says.

"Customers are struggling today with finding ways to stretch their savings beyond the price of a product," he observes.

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